Exchange Traded Commodities

why barrels of oil are traded on markets these days? Why not just between the 2 parties? Is this negotiation (on exchange) the only way to determine oil prices in world markets? How was the price set 50 years time?
Appreciate ur response. Thank you

The futures contract for crude oil started trading in 1983. In 1986, oil was down about $ 10 a barrel to about $ 40. Before that oil is traded on the spot market, the transmission, and by contract. And again. The futures market provides liquidity and risk sharing among participants and better prices for the other two markets. Thus, the actual product buyers take less risk. What is the idea of a futures market, distribute risk. West Texas Intermediate, Light Sweet Crude also known, is a benchmark in oil markets of North and South America. Brent North Sea is the benchmark for oil traded in Europe.

Futures contracts were traded in Chicago, New York, London over 100 years. The farmers began selling contracts to a buyer for a specific price. If prices have risen above the contract price, the buyer of the contract saved money. The farmer was protected against falling prices at harvest if the harvest was exceptional. The airlines buy oil contracts to hedge against rising fuel costs. U.S. oil companies to produce 2% of 85 million barrels of oil a day. You can not control prices, as some have suggested, with 2% of total production.

Futures are traded on the Exchange while forwards are traded bilaterally (ie between 2 people). oil futures have been trading for over 25 years. There are two basic criteria. 1. WTI 2. Brent. WTI is the one most often cited, which means that if you buy 1 WTI Crude Oil Futures contract, you agree to buy 1000 barrels of oil in a place called Cushing, Oklahoma.

The futures market is a means of determining the price of oil to a particular place where the future is in stock.